19 March 2024
Lebogang Mashala
According to the autumn edition of the Absa AgriTrends Report, beef prices responded positively to a surge in consumer demand during the festive season despite an increase in the frequency and intensity of load-shedding.
Historically, frequent and intense power cuts have had a significant effect on beef prices.
The report predicts that beef prices are likely to follow an upward trend in the medium term thanks to improved export prospects to markets such as Saudi Arabia.
The bank warned that the current hot and dry weather could create a problem on the supply side, which may lead to upward pressure on prices. Maize prices have increased by 15% since February and this trend may continue over the next few months.
Dr Marlene Louw, senior economist at Absa AgriBusiness, predicts that increased connections to international markets will lead to more significant price increases for beef, as the US and other key markets are expected to reduce their demand due to herd liquidation.
“The local market is likely to experience a resurgence in demand as interest rates decline and load-shedding becomes less frequent,” Louw said.
Absa says its AgriTrends Report, now in its third year, is an indispensable tool for the agricultural sector. With its in-depth analysis and valuable insights, it empowers stakeholders to make responsible choices for long-term growth.
Previous editions of the report highlighted that increased load-shedding reduced incomes and therefore consumers’ ability to afford beef. Furthermore, the risk of wastage caused by prolonged power disruptions swayed consumer attitudes about purchasing beef, causing prices to rise. However, this trend has reversed in recent months.
According to Louw, the resilience of prices in South Africa can be attributed to three factors. First, high-income households have taken measures to mitigate the effects of load-shedding. This has led to a significant rise in rooftop solar installations, with a reported increase of more than 300% in 2023. Customs data confirms that the country imported five times as many batteries in 2023 as it did in 2022.
Second, lower fuel costs during the second and third quarters of 2023 provided some relief to the cost of living.
Third, while interest rates have stabilised at a higher level, they are expected to fall in the second half of 2024.
However, the release of the 2023 Integrated Resource Plan predicts that despite new electricity generation capacity coming online, load-shedding is likely to continue until 2027.
“Our analysis suggests that consumers and value chains have, to a large extent, invested in technologies that would mitigate the risk of waste and facilitate the flow of goods through the value chain,” said Louw.
“The increased cost of this, combined with minimal economic growth due to electricity constraints, is however likely to limit the upside of price increases, underpinned by stronger demand, over the medium term.”
